So here I am, watching all the motion in the backfield as the Commissioners trickle in following this morning’s delay.

For those who missed it, the meeting was scheduled to start at 10 a.m. Then got switched to 12:30 p.m. (Frankly, I didn’t mind, as I had not gotten a seat at 10 a.m. Real full house here today). When I got back at 12:30, I found Fred Campbell (chief of the wireless bureau) and some of the wireless staff already in the hearing room. A hopeful sign! Still, it has taken an additional hour to pull everyone together. Martin came in at about 1:10 or so, with the rest trickling in later. During the last half hour, I could see various high-ranking staff dealing with the last minute details from whatever change got made this morning.

Having outside witnesses at an open Commission meeting called for the purposes of voting on an agenda item is highly unusual. Martin has done this on occassion before for very significant and potentially controversial items (the ones that come to mind are the meeting where they voted to require VOIP providers to provide 911 services, the Katrina follow up, and the 2006 cable competition inquiry (which took place in Keller, TX).

Yesterday, the House Commerce Committee held its FCC Oversight hearing. As expected, the 700 MHz auction attracted a great deal of attention. As I wrote in previous entries, this was make or break time for wholesale open access. If Commerce Committee Chair John Dingell (D-Michigan) and Telecom Subcommittee Chair Ed Markey (D-MA) voiced strong support, that might push Martin to adopt full wholesale open access in light of Google’s commitment to bid. OTOH, if the House Dems did not back wholesale, then Martin would be unlikely to budge.

Dingel and Markey did not back wholesale open access. Indeed, Dingell backed off slightly from his previous hard-line stance on even device open access (aka, “open access-lite” aka the “Martin plan”), asking for assurances that including such a condition would not hurt auction revenue or limit bidding. Markey, while enthusiastically supporting device open access and suggesting ways to improve it and make it effective, did not mention wholesale at all.

The biggest supporter of wholesale open access was Mike Doyle (D-PA), who gets a huge Sausage Factory cheer for stepping up to the challenge. You can see a clip of him asking the Commissioners where they stand on wholesale open access here. The good news is that Democratic Commissioners Michael Copps and Jonathon Adelstein remained staunch in their defense of wholesale open access as a means of encouraging competition and deployment. Intriguingly, Martin did not slam the idea, but said this was not the place to do it because he had concerns about the incentives for network build out of wholesalers. McDowell remained adamant against (as he did against even Martin’s device open access proposal), although McDowell praised the pending FCC proceeding to open the broadcast “white spaces” for unlicensed use (which I hope he remembers when the time comes). Tate did not answer Doyle’s question (no time), but elsewhere said she was keeping an “open mind” on device open access.

Republicans, with the exception of Pickering (R-Miss) slammed Martin hard for supporting even device open access. To his credit, Martin defended the idea that the auction was not about maximizing revenue but about getting the best policy. But the near-uniform opposition to any conditions on licenses by Republicans, combined with the silence of key Democrats on wholesale, puts Martin in a real bind.

So what happens now? Are there any cards left to play, rabbits to pull out of hats, or Corbemite maneuvers to run that could still save wholesale open access. Yes, but they are very long odds indeed. With the vote now scheduled for July 31, we are just after the two minute warning and down a touchdown and a field goal.

In effect, Chairman Martin’s plan faces Google and others with a “put up or shut up” opportunity. If they are serious, they will be able to bid and test their model in the marketplace against the business models of companies already enjoying widespread consumer acceptance.

Critically, Ciconni was referring to the “reserve price” feature of the Martin plan. To protect himself against the threat that even his device only open access would depress auction revenues, if the 22 MHz “C” block did not fetch at least $4.6 billion in bids, the FCC would cancel that part of the auction, split the 22 MHz int two 11 MHz blocks, and reauction without conditions. (Reserve prices are not uncommon in spectrum auctions, although as far as I know they have never been tied to a specific condition.)

In a stroke, the Google letter changes the nature of the game. Google has now guaranteed that the feds will make their auction projections — but only if they include real open access. Meanwhile, rumors swirl that it may be AT&T, rather than Google, that sits this auction out. Suddenly, we switch from “will including wholesale open access keep out bidders and lower the revenue” to “will not including wholesale open access keep out needed bidders and drive down revenue.”

Meanwhile, the clocks ticks toward deadline. What does it mean? What happens next? And will I ever get a vacation this summer?

AT&T did a full reverse thrust on Martin’s proposed open access plan. According to this USA Today piece, Jim Cicconi, Senior Executive Vice President for Public Policy at AT&T, has nothing but praise for the genius of Kevin Martin and the utter perfection of his proposed 700 MHz band plan with “open access-lite”. No, seriously, that Solomon Guy was a moron compared to Kevin Martin and the clever way he has cut this spectrum baby in half. Further, to hear Cicconi sing it, he cannot imagine why anyone would think that AT&T was threatening to sue the Commission if it implemented this wonderful, perfect, glorious plan that the genius that is Kevin Martin has brought down from Heaven after spending 40 days and 40 nights reading the docket.

I hope the AT&T Deathstar has good shock absorbers, or they are going to have serious whiplash from all these radical course reversals.

But I know y’all don’t come here just to see me mock incumbents (although I like to think of that as an added service). The big question that everyone wants to know is WHAT THE HECK IS GOING ON AT AT&T? Sadly, short of sneaking some veritaserum into Jim Ciconni’s coffee, there is no way to tell for sure. But I provide some guesses, theories, and speculations on the implications for the 700 MHz Endgame below…..

Unsurprisingly, in the swirl of folks around this week’s House Commerce “iPhone” Hearing, rumors and gossip about the 700 MHz Endgame abounded. In the nasty-but-sadly-believable category comes a rumor that the Bells have asked (through a wholly owned subsidiary in the House) for the Office of Management and Budget (OMB) to do a “study” on whether any open access condition (of any definition) or other incumbent restriction (such as the spectrum caps urged by the Public Interest Spectrum Coalition) will depress auction revenue.

To those who know how these things usually work, the first question is “Why Ask OMB and not the Congressional Budget Office (CBO) or the Congressional Research Service (CRS), which usually do this sort of thing?” And to those of us who have lived through the last 6 years of an Administration that spells “research” P-R-O-P-O-G-A-N-D-A will cynically answer, “because that way the telcos can make sure they get the ‘right’ result.” Unlike CBO or CRS, which are under the control of Congress and generally take their research pretty seriously, OMB is directly under the control of the Bush administration.

In part I, I wrote about Martin’s carefull PR blitz to frame the 700 MHz endgame. But its important to look at the substance of Martin’s draft order itself. Because, as always, Martin is damn clever, and has put stuff in there that is bloody tempting to go for the compromise. To keep this manageable, I will limit my discussion here to just assessing the rumored offer and how I think we could improve it, keeping in mind that this is just press reports and really doesn’t cover the panoply of issues. In Part III, I will provide my Field Guide for the Endgame, reminiscent of my original Impossibly Long Field Guide from April (how much things have changed in 3 months).

Martin has opened the endgame on the 700 MHz auction rules with some strategic press leaks to frame the debate and the circulation of his draft Order. According to USA Today and The Wall Street Journal, Martin’s draft proposes including a network attachment/wireless Cartefone rule on two blocks (the “C” and “D” blocks). At the same time, Martin is redefining “open access” to mean network attachment/wireless Cartefone (the issue popularized by Tim Wu with the help of the iPhone) rather than the wholesale obligation pushed by Frontline and the Public Interest Spectrum Coalition (PISC).

What makes Martin’s proposal particularly problematic is that it does actually do some good on issues I (and other folks in spectrum and media reform) care deeply about. It does represent a step forward. But it represents such a baby step, and deferred so far into the future, that it becomes useless for the near term (as Google argued in this recent filing (worthy of a post of its own)) and may actually take the pressure off the FCC to do something real like grant the Skype Petition or do something real on Network Neutrality.

Still, it presents a real challenge for the Democratic Commissioners as they enter into negotiations. Do they hang tough and risk losing everything on a 3-2 partyline vote? Do they accept a compromise, recognizing the political risk?

Worse for the Ds (and supporters of open access generally), the pressure from Congress has gone fairly hard against wholesale open access in recent days. The Republicans in the Senate and the House have bombarded the FCC with letters against wholesale open access. While some Ds (notably Kerry) have supported real open access, the Dem leadership and most Ds have remained on the sidelines. Still, tomorrow’s House Commerce Committee Hearing on Wireless Innovation will offer Democratic leaders to weigh in — if they so desire.

This Is long, so I am going to break it up into a couple of posts. First, the difference between Martin Open Access and Real Open Access . . . .

Despite the efforts to make common carriage and structural separation of wholesale and retail services a forbidden topic of discussion (go read the piece Greg Rose and I wrote last year on how industry rationalizes policy by controlling the debate), the old and highly successful idea of structural separation for carriers continues to undergo a significant revival. For starters, the Europeans have recently embraced structural separation as a policy goal, and have consequently begun kicking our rear ends in broadband speed, price and overall adoption. For another, some of us do not forget that structural separation used to be the law under the Computer Proceedings, and that this old form of open access is what gave us the internet in the first place. Finally, the argument advanced that simply because we have more providers in the market, the underlying rationale for structural separation goes away, as always struck me as poor policy driven by ideology.

I am pleased to see that David Weinberg has now written this excellent piece on structural separation. This marks the second internet “thought leader” to offer well-written and challenging pieces pleading the case of structural separation, the first being David Isenberg’s Making Network Neutrality Sustainable. Both these authors make the case for the next logical step in the Network Neutrality fight — going back to a set of rules that will prevent the network operators from interfering with the content that flows over the network by altering the economic incentives of the carriers.

Not surprisingly, we can anticipate two responses, the standard antiregulatory response (“Regulation is bad, hmmmmmmKay….Cause, if you do the regulation, then, that’d be government, and big government is bad, hmmmmmmKay….so regulation is bad, hmmmmmKay……”) and the economic response about how such a scheme destroys producer incentives so networks don’t get built. The chief problem with the producer incentive argument, however, is that the empirical evidence in Europe and Asia appears to prove the opposite case: a combination of structural separation and government subsidy facilitates deployment and maximizes incentives and revenue throughout the value chain, while focusing strictly on incentives for core network providers (e.g., the AT&T’s and Comcasts of the world) produces inferior results by every metric other than network operator profits.

My key takeaway here is that we continue to see a revitalized public policy debate that moves beyond the timid counsels of the edge-based industry players who define their “ask” in terms of what the incumbents have defined as possible, and despite every effort by the incumbents and their supporters to convince the broader public that “network neutrality” is dead and lawmakers should not worry their pretty little heads about it. Yes, we are in a legislative lull at the moment, as the public policy pendulum swings away from the incumbents and towards a more aggressive public policy more in line with the broadband success stories of Europe and Asia. But as Weinberg and Isenberg have shown, the public education and public debate remains quiet lively and continues to advance.

A brief update on my recent post that AT&T recently conceded it might consider bidding on an open access license. Unsurprisingly, Frontline Wireless — the party pushing for the “E Block” public safety/open access network — filed a copy with the Commission stating that this proves that an E Block auction would attract bidders and that the business model is workable. In response, according to today’s (6/29) Communications Daily an AT&T spokesperson said: “Our position has not changed. As we’ve stated on the record at the FCC, mandated ‘open access’ conditions on licenses in the 700 MHz band should be rejected. We need to see the specific rules the FCC adopts for auction before determining our level of participation.”

The carefull reader will note that these statements are not inconsistent. Of course AT&T would prefer not to have open access, and — at the drop of a hat — will explain why open access is an unworkable awful idea and you should ignore all the evidence from Europe or from the U.S. until we abolished open access in 2005. But there is a huge difference between “we hate open access and think it’s a bad idea” and “we absolutely refuse to bid on a license with an open access condition and nobody else with any money would bid either.” Given that the most potent argument against open access from a political perspective is “don’t mess with the revenue” (as evidenced by the recent Op Ed in the Washington Post by two CTIA lobbyists wearing their “think tank” hats), proof that folks other than Frontline will even show up to bid (and folks with deep pockets at that) on an open access license is rather significant.

Meanwhile, open access for the 700 MHz auction continues to attract new supporters from different sectors of the industry. Northop Grumman, rather a heavy-weight in the equipment manufacture and public saftey/defense contracting world, filed this document supporting open access and explaining that yes, you really can construct a secure public safety network that shares spectrum with an open access commercial network. So much for “it will never work, it’s too hard, lets stick to what we’ve always done.”

In addition, the Frontline cover letter on the submission that introduced the “Well Connected” post with the AT&T interview stated that Citibank had made a presentation to the Commission “last week” explaining that open access is a workable business model. Annoyingly, I can find no record of this presentation in the record for Docket 06-150, but I may just be missing it (it is a pretty big docket). (UPDATE: My thanks to Susan Crawford for pointing me to the appropriate ex parte filing.)

But assuming that Frontline accurately describes a presentation that took place, we now have:

1) A statement by a major financial investor that open access is an attractive and workable model from a business perspective;

2) A statement by a major equipment manufacturer and network operator that commercial open access — even in the more complicated universe of a dual use public safety network — is technologically feasible;

3) A statement by a major incumbent that it would at least “look at” bidding on an open access license if the Commission adopts such a rule;

4) Statements by wireless equipment and wireless application providers that there is a desperate need for open access in the wireless world and in the provision of broadband services generally;

5) Over 250,000 individuals saying the status quo sucks and we want open networks and new providers.

On the other side, we have the entire incumbent industry and its usual cheer leading section chanting that everything is vibrantly competitive, we live in the best of all possible worlds, everything works perfectly and competitively, and even thinking “open access” too loudly will scare away bidders and reduce revenue to a fraction of the expected $10-15 billion. And besides, open access can’t possibly work either on the business side or the technical side.

And all the while, the clock ticks away, as everyone scrambles to get this done before the end of the summer.

Until now, the existing incumbents of all shapes and sizes have presented a solid, immovable wall of resistance against any kind of “open access”/wholesale obligation attached to a license. In the context of the Frontline proposal in particular, carriers have railed against it as a “poison pill” that would scare away potential bidders and reduce the projected $15 Billion auction revenue to spare change and half a wooden pencil.

“It’s a different business model for us, but one that we’d be looking at,” Quinn said in an interview with the Center for Public Integrity’s “Well Connected” Project. “If, in the end, that spectrum is attached to public safety, and for example there’s a wholesale requirement, we’ll take a look at it.”

AT&T is waiting for final FCC rules before deciding whether or not to place a bid. “Our position is that we need to see the specific rules the FCC adopts for the auction before determining our level of participation,” AT&T spokesman Michael Balmoris said on Monday. The FCC rules are expected by July.

That looks pretty tame, until one considers the speaker and the context. In spectrum lobbying terms, this is roughly the equivalent of Iranian President Mahmoud Ahmadinejad saying that, under the right circumstances, he would accept an invitation to visit Israel and meet with Israeli Prime Minister Ehud Olmert.

More importantly, AT&T’s statement that it would consider bidding on an E Block license with an open access condition has significant implications for the debate about the auction itself. Statements churned out by incumbents and their think tank cheerleaders — such as this Washpo Op Ed from two CTIA consultants/think tank dudes — portray open access as so onerous that it will kill the auction revenue. AT&T’s statement that it would consider bidding on open access licenses demonstrates that such arguments are utterly bogus. Because if AT&T would consider bidding, you can bet your last cell tower that every other major incumbent would conisder it as well. What, sit it out and let all that spectrum go to a rival?

So why would AT&T even hint at a change in position, given how deeply this undermines the “absolutely no, never, you must be mad” rhetoric of the anti-open access opposition? For wild speculations, see below . . . .